The High Court of Delhi in India recently enforced an
international arbitral award arising from the London Court of
Arbitration between a Japanese and an Indian entity. Both the size
of the award and the court's willingness to enforce it in India
against an Indian corporation make this an important decision.

Overview of the Arbitration

The arbitration arose out of the dissolution of a joint venture
between Tata Sons Ltd. (part of the Indian conglomerate Tata Group)
and NTT Docomo Inc. (a Japanese telecommunications company) in Tata
Teleservices Ltd.

In 2009, Docomo purchased a 26.5% stake in Tata Teleservices.
The share purchase agreement provided Docomo with the right to
withdraw from the venture if Tata Teleservices failed to reach
certain performance targets. If Docomo chose to withdraw, Tata Sons
would be required to find a purchaser of Docomo's shares for
the greater of either the fair market value of the shares or 50% of
the initial purchase price of the shares.

In 2014, when Tata Teleservices failed to reach its targets,
Docomo opted to exit the venture, triggering Tata Sons'
obligation to find a purchaser. When Tata Sons failed to do so,
Docomo initiated arbitration to the London Court of Arbitration
under the London Court of International Arbitration Rules.

At the arbitration, Tata Sons argued that a share transfer of
this nature offended the Indian Foreign Exchange Management Act,
1999 ("FEMA") with respect to the transfer of securities.
The Arbitral Tribunal rejected that submission. The tribunal
ultimately found that Tata Sons breached the agreement when it
failed to find a purchaser, and ordered that it pay damages to
Docomo in the amount of 50% of the initial purchase price, being
approximately $1.18B USD. Docomo was also ordered to transfer its
shares to Tata Sons.

The Enforcement Proceedings

Docomo applied to enforce the Award in India at the High Court
of Delhi. India is a contracting state to the New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards.

While Tata Sons initially opposed the enforcement on the grounds
of public policy, namely that such a transfer was in violation of
Indian law (i.e., FEMA), the parties ultimately reached a
settlement, that called for Tata Sons to deposit the awarded amount
in court and withdrew its opposition to enforcement. In exchange,
Docomo would suspend its proceedings against Tata Sons in the
United States and the United Kingdom.

However, the Reserve Bank of India ("RBI") sought to
intervene in the enforcement proceedings and oppose the enforcement
on the same grounds that Tata Sons had initially opposed it (i.e.,
violation of Indian law such that the award is contrary to public
policy).

In its judgment, the court ultimately held that a non-party to
the Arbitration could not intervene in enforcement proceedings, as
there was no basis in law to do so. The court further found that
the sum awarded to Docomo Arbitral Tribunal was damages and not a
sale price of shares. As such, the transfer was not in violation of
Indian law and enforceable.

Key Takeaways

Though it is possible that the RBI appeals the result, the
Indian court's decision is a positive step for a country that
is seeking continued foreign direct investment to drive its
economy.

Foreign businesses can begin to take comfort that the Indian
courts have recognized the supremacy of the Arbitral Tribunal's
decisions in the face of opposition by an Indian company and
non-parties to the arbitration.

In 2002, the Indian Supreme Court decided, in Bhatia International v Bulk Trading SA1 ('Bhatia') that Indian courts had exclusive jurisdiction to test the validity of an arbitral award made in India...

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